BROKE, USA

From Pawnshops to Poverty, Inc.--How the Working Poor Became Big Business

Using a couple of heroes and more than a few foils, journalist Rivlin (The Godfather of Silicon Valley: Ron Conway and the Fall of the Dot-coms, 2001, etc.) dives into the dog-eat-dog world of Poverty, Inc.

Amid the greatest financial crisis since the Great Depression, countless captains of the poverty industry continue to thrive on the measly paychecks of working-class citizens. Check cashers, payday lenders (who used to be called “loan sharks”) and pawnbrokers spread throughout the United States, cropping up in low-income neighborhoods like weeds. Allan Jones, Chairman and CEO of Check Into Cash, is one of those weeds. He is also a world-class finger-pointer. According to Jones, the 2008 global collapse is the fault of one man: Martin Eakes, “who, in the mid-1990s, convinced the Federal National Mortgage Association—Fannie Mae—to help his organization, the Center for Community Self-Help, create a first-of-its-kind secondary market to buy and sell subprime mortgages.” Eakes did make subprime loans as far back as 1984, but Self-Help drew a line at targeting uneducated people living on fixed incomes, payday’s so-called “perfect customers.” Payday lenders sprung up in 1996, when the Ohio legislature “voted to exempt small, short-term loans from the state’s 28 percent usury cap, thereby legalizing payday lending.” Once the banks started buying up payday and cash-advance businesses, they went to work in Washington with a bipartisan group of lobbyists. Even a former chief of staff for Clinton served on a board of “swat team” advisors for Household Finance Corp., one the most infamous and cavalier subprime lenders. Recent legislation has managed to temper the more extreme interest rates, but the weeds continue to sprout despite measures to stomp them out. One crude and ironic point driven home capably by Rivlin is the fact that as long as the working poor need money, payday lenders will be there “help.” As a now-bankrupt former millionaire put it, “You can make more money off the rich but it carries a much bigger risk…The thing about the poor people’s economy…is that basically it’s recession proof. You’re always going to have people who need $100 or $200 real quick.”